Why do we even need subprime anyway?

We’ve heard it all before: Subprime customers are poor. They’re deadbeats. They shouldn’t be able to buy new things if they can’t afford them. Wrong, wrong and wrong. Each one of those statements is completely false. And we’d like to tell you why in three short thoughts.

First, let’s level set and look at FICO scores overall. 

The term “subprime” refers to a range on the credit spectrum. Depending on whom you ask, the subprime range is typically from the mid-500s to the mid-600s. Experian, for example, defines subprime as 580-669¹. Meanwhile, on the top end of the credit spectrum, Experian says a score of 740 or higher is considered “super prime.” Others say that top tier begins at 780 or even 800. So, somewhere in the middle – from the mid-600s to the mid-700s – is a prime credit score that tells lenders you’re a low risk for defaulting on your next loan.

Second, see what little it takes to fall from prime credit into the subprime category.

In a nutshell, according to Equifax, it doesn’t take much. Looking at FICO data, “a 30-day delinquency could cause as much as a 90- to-110-point drop on a FICO score of 780 for a consumer who has never missed a payment on any credit account.” ² Similarly, a consumer with a 680 FICO score and two late payments would experience a 60-to-80-point drop after being hit with another 30-day delinquency.

Third, being defined as subprime doesn’t necessarily mean you manage your money badly or are an unacceptable credit risk. And that’s why there are companies like Exeter.

As the scenarios above indicate, even if you normally pay your bills on time, an unexpected financial emergency, a lost job, or even a simple oversight could cause you to fall behind on your payments. And that could drop the great credit score you’ve earned over many months or years into the subprime range in just 30-90 days. At Exeter, we know bad things happen to good people, and oftentimes their FICO score suffers. So, we’re there to help consumers who still need reliable transportation to get to work or take the kids to school – even when circumstances push their credit score into the 600s, 500s and even 400s.

We know some people are subprime customers because they’re bad at managing money or they habitually overspend what they can afford. But sometimes people find themselves in a bad spot that’s not even their own fault. A death in the family, divorce or serious illness can come on suddenly and have an immediate detrimental effect on a credit score – on top of everything else.

No matter the reason, we understand. So, when a subprime customer needs wheels, remember Exeter can help.

Sources:
¹ Luthi, B. (May 10, 2019). How Subprime Loans Can Affect Your Credit. Retrieved from https://www.experian.com/blogs/ask-experian/do-subprime-loans-hurt-your-credit/.
² Equifax Experts. (Feb. 7, 2014). Can One Late Payment Affect My Credit Score? Retrieved from https://blog.equifax.com/credit/can-one-late-payment-affect-my-credit-score/.